If you’ve been living under a rock terms like blockchain, cryptocurrency, smart contracts and Ethereum probably sound like a mixture of witches brew ingredients and stuff that hacker man would need to take down an evil corporation.
If you’re one of the millions and millions of people who don’t live under rocks you might still have no idea what these terms mean so prepare yourself. You’re about to get schooled.
Let’s begin with blockchain. It was introduced in 2008 with the conception of Bitcoin – a form of digital currency that we’ll cover in a moment. It was introduced by someone (or a group of someones) named Satoshi Nakamoto.
Blockchain sought to solve a problem — the middleman. How can we eliminate the need for a trusted third party in transactions of all kinds, not just financial transactions. This can be accomplished by entrusting the verification of transactions to multiple, random and anonymous connected nodes all secured by complex cryptography.
Proponents of the blockchain call it, “a trustworthy system in a trustless world” because by removing the third party middleman safer, faster, and cheaper transactions can occur. Blockchain is basically an immutable database. Some call it a ledger secured with fancy-pants cryptography. It’s basically a fancy list but some things to note are that it is append-only – what’s been added can’t be changed. It’s crazy secure and can only be added to via the consensus of peers.
But how does it work?
Imagine that this list (or ledger) exists inside of a journal and each page is referred to as a block. If you were to take out all those pages and tape them together end to end you would have a chain of blocks. Hence, blockchain. Every time a transaction occurs, a public record is written to the blockchain and is verified by multiple nodes all around the world. Once verified, the transaction is considered legit and is permanently added to the public record. Now we should talk about cryptocurrency.
Bitcoin, for instance, is one application of blockchain technology where a digital currency was minted and granted to people based on the work put in by their computers running what’s called a mining application. Mining programs, when running, basically perform complex calculations to verify the other transactions taking place around the globe using cryptographic algorithms. In exchange for their processing power, they are granted tiny fractions of bitcoins. This same process applies to many other cryptocurrencies you may have heard of.
I mean, how could it benefit the world?
Now if you’re thinking of blockchain from a business perspective, it’s a platform where peers can exchange values using transactions without the need for a central third party or middleman. This removes the need to worry about the validity or the security of the transfer. The implications of this could be of internet level disruption but let’s talk about the middleman. Why is that such a bad thing?
Any app you use is relying on a third party backend server, right? The data needs to be stored somewhere. If you use an app from Google or an app that uses a Firebase backend you are entrusting your data, your security, and most importantly — your information to them. You send it to them and they send it to whoever you’re trying to reach. They have a lot of control over what they know about you, what they can access, and what they can secure for you. If their security is breached, your security is breached. Now, like I said, the implications of this technology could be world-altering.
What could this look like?
Some powerful examples are cheap, instant, and secure peer-to-peer money transfer that is decentralized not through PayPal, not through Venmo, just peer-to-peer.
Another example is micro payments. Instead of subscriptions for access to a service, you could pay for only what you use or on the flip-side you could get paid little teeny fractions of cryptocurrency for tasks you do online like completing surveys, proofreading emails etc etc.
Identity and privacy is another one while your identity is never fully anonymous when making a blockchain transaction it’s essentially masked by cryptography so things like health care related documents financial documents contracts etc would be well secured without needing to worry about the middleman’s security or exchanging information with someone you don’t want to.
Smart contracts are public chunks of code that self execute when both ends of a deal are upheld – a very beneficial push in the business world right now. “A trustless system in a trustless world”.
Of course, the Internet of Things could benefit from blockchain and smart contract tech. What if your connected thermostat could bid on cheaper energy prices for you? What if a freeway could identify your self-driving car and automatically accept payment to move you over to a pay-per-use fast lane.
This is all possible with blockchain technologies. We’re in the building phase right now think of the internet before it was mainstream are you gonna be a part of this or are you just gonna wait it out?